Taxation: History, Key Points, Pros and Cons Term Paper

Introduction

Taxation is a process through which compulsory payments are levied on people, establishments and property to support political, economic and service delivery by the government. Tax is defined as a payment remitted to fund government services/programs.

History of taxation

The concept of taxation is traceable to 13^th century. It is believed that the French and the Latin initiated the concept as government source of revenue. However, existing literature suggests that tax existed in multiple forms across different civilizations. Leaders in power imposed and collected tax from their subjects as a way of funding operations. Items taxed and form of tax varied from one jurisdiction to another (Jaffee, 2012).

In ancient Egypt, Pharaohs taxed cooking oil. The taxes were collected by scribes that ensured all subjects paid taxes as appropriate. In Greece, tax was only paid during wars. Proceeds obtained in the result of taxation were used to purchase weapons. In the Roman Empire appointed people (publicani) forcefully collected gifts from people in markets and offered to Emperor Caesar (Jaffee, 2012). On the other hand, in Britain, taxation is traceable to the 11^th century when Lady Godiva agreed to ride through the streets naked if only her husband would agree to lower taxes charged on peasants (Atkinson, 2009).

Key points of taxation

Taxation involves multiple points including:

• It is charged as a percentage of value of an item, property, or establishment (Li, 1991).
• It is charged over a specified period of time
• Tax percentage is based on income levels
• Covers a specified age bracket

Pros and cons of taxation

Taxes, like all other aspects of public policy have its advantages and disadvantages. Its advantages include:

1. Taxes are used to fund government operations. Such operations are useful to both the government and the general public.
2. Distribution of wealth. Wealth is distributed through subsidies government offer to the poor through tax generated funds.
3. Regulating consumption. In some instances taxes are increased or reduced to discourage or encourage consumption of some products. For instance, governments have been known to heavily tax alcohol and cigarettes as a way of reducing consumption rates.
4. Funding special projects. Some governments charge special taxes to fund special projects. Such projects include construction and maintenance of roads or constructing of special homes for persons with disability.

On the other hand, the cons of taxation include:

1. Taxes impose an extra social burden to the population
2. Taxation often puts the government on a collision course with the citizens

Taxation effect on media, economic, policy and public opinion

Taxation has largely affected the society. As a matter of fact, tax has emerged as an important factor citizens consider in choosing their leaders. Most, if not all campaigns feature taxation policies leaders propose. Additionally, the level of taxation, implementation of tax policies as well as the use of tax-generated funds largely shapes public opinion with respect to the day’s government (Arnold, 2011). Therefore, tax is an important aspect of any modern country, especially considering that a majority of government projects are funded by tax.

Effects of taxation

Effects of taxation remain profoundly evident across different economies. In many countries, generated taxes have been used to fund mega-infrastructure projects. Such projects are crucial to the economy and directly impacts on the lives of the public. Other than funding important infrastructural projects, other sectors such as health, defense, and agriculture also benefit from taxation. Taxation has also been known to paint governments negatively to the public. However, this has to be so considering that it is only in an ideal situation that a government can charge zero tax. Modern day governments have become fully reliant on tax as a source of income (Arnold, 2011). Additionally, illegal governments and militia impose taxes on local populations as a way of funding their illegal operations. Such a move can be detrimental to the society.

Current trends in taxation

Over the years, the concept of taxation has largely evolved as governments seek ways of funding operations. As the inflation goes up and cost of living rise, so does the cost of running governments. New tax regimes are already being introduced to boost the already constrained government spending. In the recent past, property and corporate taxes have risen sharply across different jurisdictions.

Irrespective of varying speed of implementation, different calendars and specific traits in various jurisdictions, global trends with regard to tax systems are similar. Many nations are headed towards tax systems which does not prioritize foreign investment attraction. Instead, most countries are simply prioritizing revenue collection to meet the government’s needs. However, the policies meant to attract foreign investors still apply to some sectors such as housing, where governments seek to have investors help in construction of houses (Li,1991). Modern tax regimes are intended to have foreign investors, just like local investors, make fair contribution to the economy. Additionally, many tax regimes have implemented stringent measures to curb tax frauds and tax evasion cases (Lynn, 2008). However, the biggest breakthrough in handling cases of tax collection issues is incorporation of ICT. Today, more and more governments across the globe are implementing IT systems in tax collection. Additionally, stringent laws are being formulated to streamline tax collection bot at personal and corporate levels.

Unlike developed countries that have strong tax systems, developing nations still lose billions through tax system loopholes and corruption. However, the increased attention paid to tax systems has seen possible solutions to taxation challenges proposed with others already being implemented (Acosta-Ormaeche & Yoo, 2012). Many proposals however remain at theoretical levels where models have been constructed to represent productive and equity-driven tax systems.

Conclusion

Tax has been and remains an important element of modern-day governments. Administration of government functions, service delivery and economic development all rely on tax. As a matter of fact, it is almost impossible to run any contemporary government without taxation. However, it is important that further research is done to establish ways through which tax collection can be optimized without straining the already socially constrained citizens. Modern tax system should not only take into consideration the social challenges faced by society but also be easily accessible to the citizens. ICT offers great potential for creation of user-friendly, easy to operate tax systems. Legislations should also be formulated to cushion the citizens against unfair tax regimes imposed by selfish leaders keen on fleecing people of their hard earned money. A tax system is as good as the people implementing the system. In a number of instances, tax systems have failed to yield tangible results not because of system inefficiency, but rather due to poor implementation.

References

Acosta-Ormaeche, S., & Yoo, J. (2012). Tax Composition and Growth: A Broad Cross-Country Perspective (IMF Working Paper No. 12/257). Web.

Arnold, J. M. et. a. (2011). Tax Policy for Economic Recovery and Growth. The Economic Journal, 121, 59-80.

Atkinson, B. (2009). Optimal Taxation and the Direct Versus Indirect Tax Controversy. Can. J. Econ. 15(6), 590 – 592

Jaffee, B. L. (2012). State Taxation of Intangibles: Problem of Evasion. Public Finance Quarterly, 6(2), 485-502.

Li, J. (1991). Taxation in the People’s Republic of China. New York: Praeger.

Lynn, A. D. (2008). Trends in Taxation of Personal Property. Princeton, New Jersey: Tax Institute of America.